How Modi govt's 2nd term may impact your money and what full budget 2019 may bring

Now that Narendra Modi's is back as the prime minister, here's how the BJP government's second term can impact your personal finances and what the full budget 2019 may bring. Income tax sops, extension of an existing housing scheme, pension schemes, Aadhaar-related amendments, more steps to push digital payments and greater stringency in tax administration are among the areas where you might see some action by the new government. Read on to find out why we are saying this.

1. More income tax relief for middle class?
In an earlier interview to the Economic Times after the Interim Budget in February 2019, the then Finance Minister Piyush Goyal had hinted that if the Modi government returns to power then the new government may consider more relief for taxpayers in the main budget after the General Elections.

The interim budget did not make any changes in the overall tax slabs and tax rates but gave full rebate of tax payable to all those with taxable income up to Rs 5 lakh. Here is an excerpt from the interview:

"As the PM said, that is only a trailer, the final budget will be coming in July. In the interim budget, we have not been able to make full proposals that we would have liked to in income-tax. Despite that - in particular middle class and newer middle-class sections, we didn't want them to go through the inconvenience of going to the tax department for returns, refunds and stuff like that - we thought this (rebate) part cannot wait."

2. Complete overhaul of the income tax law
In 2017, the Modi government formed a task force to draft a new direct tax legislation or code to replace the existing 50-year-old Income Tax Act.

The task force was scheduled to submit its report by February 28, 2019. However, this deadline was extended by three months to May 31. Therefore, it is likely that in its second term, the Modi government may replace the existing Income Tax Act.

3. Aadhaar
The Modi government had initially made Aadhaar mandatory for multiple services and transactions such as filing income tax returns, applying for PAN card, mobile connections and even opening bank account. However, later, the Supreme Court in a judgement held that Aadhaar could not be made compulsory for opening of bank accounts or getting mobile phone connections.

Following this, the Modi government piloted a Bill through the Lok Sabha to amend the Aadhaar law. The amendment aims to allow the Aadhaar card holder to voluntarily use Aadhaar for KYC purposes. The Bill has been passed by the Lok Sabha and awaits clearance by the Rajya Sabha.

4. Stricter tax administration
The BJP government's last term saw the clean money campaign post demonetisation, various tweaks in tax rules and laws to plug leakages and put a check on cash transactions (for instance, the new income tax return forms ask for much more detailed information than before). This trend may continue given the return of the government to power.

5. Pension scheme for senior citizens could be extended further
The Modi government had, in budget 2018, increased the maximum investment allowed under Pradhan Mantri Vaya Vandana Yojana (PMVVY) to Rs 15 lakh per senior citizen. The scheme has also been extended up to March 31, 2020. As this scheme was introduced by the Modi government it is likely that the scheme may be extended further now that the government is back in power.

6. Time period of home loan subsidy scheme could be extended further
Currently, the credit-linked subsidy scheme (CLSS) for home loans for the Middle Income Group (MIG) ends in March, 2020. The then Union Housing and Urban Affairs Minister, Hardeep Singh Puri, said, "till December 30, 2017, around 3.4 lakh beneficiaries have availed the CLSS under the PMAY (Urban)". In view of this, Puri, on December 31, 2018, extended the scheme for one-year, i.e., till March 31, 2020.

With the BJP set to form the government again for the next 5 years, the probability of the time period of the scheme for those in the MIG category being extended further -perhaps till 2022--is high. This may be done to help accomplish the government's vision of 'Housing for all' by 2022 successfully.

7. Promotion of and protective measures for electronic payments
The earlier Modi government had taken several steps to promote digitisation of financial transactions to make India 'cash-lite'. This trend is also expected to continue. The Reserve Bank of India has already announced that it will soon come up with a new set of customer-protection measures aimed at improving user confidence in electronic payment channels.

The new customer-protection measures on the cards for electronic payments may include compensation framework for failed transactions and a common time frame for all authorised electronic payment systems to respond to customer complaints.

8. Interim budget 2019's tax changes here to stay
The Modi government's return to power is also expected to set at rest any fears that the laws made in its interim budget 2019 may be rolled back by a new government following the general elections. The main among these include: full income tax rebate for those earning up to Rs 5 lakh per annum, increase in standard deduction from salary to Rs 50,000, removal of tax on notional rent on second house, hike in TDS threshold limit and so on.